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Will Weight Watchers Deliver a Healthy Fourth Quarter?

With its last report, Weight Watchers suspended its dividend. Will the company fare any better in the fourth quarter?

Brandy Betz has written for The Motley Fool since 2011 and primarily covers health care, ETFs, and dividend stocks. You can follow her on Twitter @BrandyBetz.

Weight-loss company Weight Watchers International(NYSE:WTW) will report fourth-quarter and full-year results on Feb. 13. The last earnings report was disappointing enough to result in a dividend suspension, and this report won't include the temporary boost from post-holiday dieters. Will Weight Watchers have another rough week?

Weight Watchers operates a subscription diet plan that includes optional in-person meetings and the company also sells branded food products in stores. The company competes against a wide range of healthy food goods on those store shelves while also going up against Nutrisystem(NASDAQ:NTRI) and beleaguered multi-level marketing brand Herbalife(NYSE:HLF).

What should investors watch for in the fourth-quarter report?

Estimates to beat Analysts estimate revenue of $358 million for the quarter and $1.7 billion for the year. EPS is expected to come in at $0.61 and $3.87, respectively. Weight Watchers has met or beat on both metrics for the past five quarters. The company's own full-year forecast included EPS between $3.85-$3.95.

Analysts and investors will compare the results to last year's period when Weight Watchers reported $408 million in quarterly revenue with EPS of $0.96 and $1.8 billion for the year with EPS of $4.16. Meeting full-year analyst estimates would represent year-over-year drops of 6% for revenue and 7% for EPS.

Meeting attendance and subscriber count Weight Watchers doesn't make much off the food products sold in stores. Most of its revenue comes through subscriptions to its lifestyle program which includes online features and optional in-person meetings. Weight Watchers has to maintain growth in membership to sustain its business.

In the third quarter, online subscribers were down over 5% after posting a mere 1% increase in the prior quarter. Meeting attendance was down nearly 15%. Weight Watchers also had an additional problem; the customers who subscribed also stayed for less time. Average meeting paid weeks were down 11% while only paid weeks dropped 3%.

Checking the membership numbers and the comparative length of member commitments offers a quick and easy look at how Weight Watchers did for the quarter.

Competitor comparison Nutrisystem has an advantage over Weight Watchers because its money comes from the sale of products. The company operates a subscription meal delivery service with prices starting around $230 for a month's supply. Last year, Nutrisystem branched out into retail with quick-start kits sold in Wal-Mart.

Nutrisystem's shares popped 12% following the third quarter report in October, which featured 5% revenue growth. Analysts expect Nutrisystem's fourth quarter to include revenue of $124.68 million and EPS of $0.14.

Another weight-loss company focusing on products is Herbalife, but this company comes with more controversy. Herbalife recently revealed that its fourth quarter EPS came in between $1.26-$1.30, which prompted Bill Ackman to set up a website furthering his accusations that Herbalife is a pyramid scheme that the government should shut down. Herbalife's products are distributed through a multi-level marketing structure that does create an inherent instability. The company has to worry about selling products and hope that its sellers don't stage a mass defection.

Foolish final thoughts Weight Watchers will likely continue to struggle in the fourth quarter due to both the year's established trend and because the holiday season isn't the most popular time for starting a diet program. The company's also at a disadvantage because of an over-reliance on product-less subscription plans, more complicated to manage than moving products off the shelves.